Importance of cottage and small-scale industries in Indian economy
The small-scale industries and cottage industries had an important place in Indian economy. After independence, more efforts are giving to develop industries units. In India, small-scale industries and cottage industries are very useful for employment generation, production with small capital, industrialisation in rural areas, development of backward areas, reduce regional imbalance and to have adequate distribution of national income and wealth.
Industries which have investment more than ` 25 lakhs and less than ` 5 crores are known as small scale industries. Normally, these industries use labour intensive techniques and they use very less capital in comparision to large scale industries. Even then they are very helpful to large scale industries.
Importance of cottage and small-scale industries:
(1) For employment:
The small scale and cottage industries are labour oriented and therefore, they are useful for employment. According to an estimate, these industries provide employment 8 to 10 times more than big industries. In the year 1994-95 small scale industries have generated 191.40 lakhs employment opportunities. It rose to 249.33 lakhs in 2001-02 and it sharply increased to 1,012.59 lakhs in the year 2011-12.
(2) Increase in Production : Normally large scale industries produce machinery and small scale industries produce necessary goods in nation. Small scale industries can increase production very sharply. They produced goods worth of Rs. 4,22,154 crores in 1994-95. It rose to Rs. 2,82,270 crores in the year 2001-02 and in the year 2011-12 it rose to Rs.18,34,332 crores. This way small scale industries have shown sharp increase in volume of production. The remarkable feature of this industry is that the production carried out by using less capital.
(3) Increase in Production Units : Small scale industries give different types of benefits and due to that government and people are keenly interested in it. Rise in production is only possible with rise of production units. India had 79.60 lakh small industrial units in 1994-95. It increased to 105.21 lakhs in 2001-02. That rose to the number of 447.73 lakhs units in 2011-12. That shows that development of small scale industries lead India towards industrialisation.
(4) Exports : Small scale industries have noticeable role in exports of India. Small scale industries of India exported worth Rs. 29,068 crores in 1994-95. It reached to Rs. 71,244 crores in the year 2001-02 and it rose to Rs. 1,77,600 in the year 2006-07. This way exports of small scale industries show rising demand in abroad economies.
(5) Saving of Foreign Exchange : Small scale industries are very useful to India. On one hand, they generate export incomes and on the other hand reduce India’s import expenditure by producing many necessary goods locally. Ultimately, they help to improve balance of payment.
(6) Short Period of Time : Small scale industries can be started within very short period of time. These industries are very useful due to very short period of time between investment and production. As it can start production in a very short period, it is useful to overcome scarcity of goods and because of this, only required volume of production can be achieved by it to help nation.
(7) High Rate of Development : Large scale industries need large profits as large amount of capital are invested in it. They develop economy with irregular rate by doing large investments because they can not get change as per the changes of market where, small scale industries can be set up with small amount of capital. Therefore on one side a large numbers of producer increase the volume of production and income. On the other side it brings changes in production as market changes as it requires shorter gestation period. Thus, small scale industries are give very high rate of development which is highly required to develop nation.
(8) For national income:
The share of industrial production in national income is very big in our country. The development of small-scale industries and cottage industries is necessary because these industries add to the national income with little capital investment and in less time.
(9) Less industrial disputes:
In small-scale industries and cottage industries, the number of workers being less there is less possibility of industrial disputes. There is closer relationship between owners and labourers in small-scale industries and cottage industries, which reduces the possibility of industrial disputes.
(10) Regional Disparity:
In small-scale industries and cottage industries, there is no importance of factor localization. Therefore, they can be set up in towns, villages, or in backward areas easily. Thus, regional disparity can be avoided.
(11) To reduce disparity of income:
The small-scale industries and cottage industries can be set up by small investment. There is less risk involved. Many producers can be involved in small scale and cottage industries. Economic centralisation can be avoided and disparity of income can be reduced. As these industries are labour oriented, more people can get employment and thus disparity of income can be reduced.
(12) Less social cost:
Urbanisation takes place because of development of industrialisation. The government spends lot of money on social expenses like water, electricity, housing, health, education etc. Small-scale industries and cottage industries can be set up in small villages. Therefore, workers get employment in local areas and social cost can be avoided.
(13) Village self-dependence:
India is a country of villages. Therefore, villages should be self-development. Villages become self-dependence only by small-scale industries and cottage industries.